We all share the distress of watching parts of Los Angeles engulfed in flames. This is a massive tragedy that will change lives for years to come. Our prayers are with all involved.
Many are already pointing fingers of blame but that is not the point of this article. Soon enough, the monumental recovery effort will start and this is our focus. Consider the following statistics which are continuing to grow as this is written:
The destroyed acreage is roughly 2 times the size of Manhattan.
Thankfully, the population density is nowhere near the same but imagine the single act of clearing a site of this size in somewhat rough terrain. What kind of landslide exposure is the area facing? We are seeing that fire is only the first hazard the area is facing.
According to AP News, over 12,000 structures have been destroyed.
Schools, homes, grocers, shops, offices, and other buildings no longer exist. EVEN IF people could magically return to their homes, where would they work? Where are children going to go to school? How far away is the closest doctor, hospital, or police station? Basic services are no longer very basic.
So far, over 130,000 people have been evacuated.
That is bigger than Yuma, or Flagstaff, AZ or Pasadena or Thousand Oaks, CA. Consider moving these communities overnight and magically placing them somewhere. The logistics alone are mind-boggling. 420,000 people (the population of Minneapolis) are without power. When will distribution lines be rebuilt so that those who can return; can live some normal lives?
And how does this impact you?
Tens of billions of dollars of unplanned construction rebuilding are on the horizon. On the negative side of the ledger are such issues as:
Prices. Construction markets in the west are pretty active now. Throwing a $100 Billion+ log on the fire will surely mean higher costs. While it may take months for insurance settlements, architectural design, planning and permitting, anticipatory price increases are a real thing. Costs will go up before construction kicks in. How does this impact your current work in process?
Materials are going to be delayed. We saw this in the Covid era. Certain materials and equipment already have long lead times. Is there adequate production capacity to churn out the lumber, wire, pipe and gear to perform your work?
Labor shortages may grow. Labor prices are on the way up. How does this impact the Trump agenda to “Drill, baby, drill” or plans to stop border crossings and expel laborer immigrants in place?
Positives may include
Fewer bidders. Public works require bonds and contractors have limits of bond credit. Full programs from this infusion of opportunity means bidders will pick and choose or pass on bidding the next job. Some who build commercial and residential may switch to either/or due to the glut of opportunity. Engineering companies will have abundant opportunities. Collectively, though, this often leads to out-of-state companies entering the market.
Profitability. Insurance funds (where available), public funds for schools and roads, or government FEMA type payouts should provide adequate funds to rebuild at the costs tomorrow brings. While there may be “sticker shock” or value engineering, disaster work has historically been lucrative for contractors.
Long term market stability. Contractors are looking at a 5-10 year window of steady opportunity which enhances employee retention and corporate stability.
There are many more considerations and options you can pursue to insulate your company from risks or to attack the opportunities this disaster presents. Constructors Bonding stands prepared to help you with our proven ideas in all aspects of your operation. We are anxious to help in any way you need. Contact me today to discuss how CBI can help you.
Dave McKee, President
The Constructors Bonding Companies
602-432-5929
Dave@cbialliance.com
